other releases from this week included the Chicago Fed National Activity Index (CFNAI) for January, which is a weighted composite index of 85 different economic metrics, constructed such that a zero value indicates economic growth at the historical trend rate; the CFNAI rose to fell to –0.29 in February from +0.41 in January., which left the 3 month average at –0.07 , indicating that national economic activity has been slightly below its historical trend this winter...the week also saw the results of two more regional Fed manufacturing surveys: the Richmond Fed March Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reportedits broadest composite index rose to 22, following February's reading of -4, the largest one month spike ever, indicating that manufacturing growth in the district has suddenly picked up after several sluggish months, while the Kansas City Fed manufacturing survey for March, which covers western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to -6 in March, up from readings of -12 in February, and -9 in both January and December, but still indicating that the regional contraction, mostly in energy related industries, continues for the thirteenth month in a row...

4th Quarter GDP Growth Rate Revised to 1.4%

the Third Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services increased at a 1.4% annual rate in the quarter, revised from the 1.0% growth rate reported in the second estimate last month, as the output of consumers services, exports, and residential investment were greater than previously estimated...in current dollars, our fourth quarter GDP grew at a 2.3% annual rate, increasing from what would extrapolate to $18,060.2 billion annually in the 3rd quarter to an annualized $18,164.8 billion in the 4th quarter, with the headline 1.4% annualized rate of increase in real output resulting after the application of an inflation adjustment of 0.9% to that current dollar change...

while we cover the details, remember that the press release for GDP reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts...given the misunderstanding evoked by the oversimplified press release, all the data that we'll use in reporting the changes here will come from the pdf for the 3rd estimate of 4th quarter GDP, which is linked to on the sidebar of the BEA press release...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since 2012, table 2, which shows the contribution of each of the components to the GDP figures for those months and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...the pdf for the 2nd estimate for the 4th quarter, which this estimate revises, is here...

real personal consumption expenditures (PCE), the largest component of GDP, were revised to show growth at a 2.4% annual rate in the 4th quarter, rather than the 2.0% growth rate reported last month, as a 2.7% increase in the rate of personal spending was deflated with an annualized 0.3% increase in the PCE price index, an inflation adjustment which was revised from the 0.4% PCE price index reported in the second estimate....real consumption of durable goods grew at a 3.8% annual rate, which was revised from 3.4% in the second estimate, and added 0.28 percentage points to GDP, as real output of recreational equipment and vehicles consumed rose at a 13.1% annual rate even as real consumption of automotive vehicles fell at a 5.7% rate.....real consumption of nondurable goods by individuals rose at a 0.6% annual rate, revised from the 1.2% increase reported in the 2nd estimate, and added 0.09 percentage points to 4th quarter growth, as real consumption of both food and energy goods decreased and real consumption of clothing was unchanged while the other categories of non-durable consumption saw modest growth...meanwhile real consumption of services rose at a 2.8% annual rate, revised from the 2.1% rate reported last month, and added 1.30 percentage points to the final GDP tally...an increase in the real output of recreational services at a 14.2% rate led the services increase, as real consumption of housing and utilities fell and output of financial services was slightly lower than it was in the third quarter...

seasonally adjusted real private domestic investment contracted at a 1.0% annual rate in the 4th quarter, revised from the 0.7% contraction estimate made last month, as growth real private fixed investment was revised from a 0.1% rate to indicate growth at a 0.4% rate, while the contraction in inventory growth was larger than reported in the 2nd estimate...the contraction in investment in non-residential structures was revised from shrinking at a 6.6% rate to a contraction at a 5.1% rate, investment in equipment contracted at a 2.1% rate, not the 1.8% rate previously reported, and investment in intellectual property products, which had previously been estimated as growing at a 1.3% rate, was revised to show contraction at a 0.2% rate...meanwhile, growth in residential investment was revised higher, from a 8.0% rate to growth at an 10.1% rate annually…after those revisions, the contraction in investment in non-residential structures subtracted 0.14 percentage points from the 4th quarter growth rate, lower investment in equipment subtracted 0.12 percentage points from 4th quarter growth, lower investment in intellectual property subtracted 0.01 percentage points, while the growth in residential investment added 0.33 percentage points to 4th quarter GDP...

meanwhile, the growth in real private inventories was revised from the previously reported $81.7 billion real growth rate to show inventory growth at an inflation adjusted $78.3 billion rate, which came after inventories had grown at an inflation adjusted $85.5 billion rate in the 3rd quarter, and hence the $7.2 billion smaller real inventory growth than in the 3rd quarter subtracted 0.22 percentage points from the 4th quarter's growth rate, in contrast to the 0.14 percentage point subtraction due to slower inventory growth reported in the second estimate....since less growth in inventories indicates that less of the goods produced during the quarter were left "sitting on the shelf”, their decrease by $7.2 billion meant that real final sales of GDP were actually greater by that much, and hence real final sales of GDP grew at a 1.6% rate in the 4th quarter, revised from the 1.2% growth in real final sales reported in the 2nd estimate...

the previously reported decrease in our real exports was revised lower with this estimate, while the previously reported decrease in real imports was revised slightly higher, and as a result our net trade was a smaller subtraction from GDP rather than was previously reported...our real exports fell at a 2.0% rate rather than the 2.7% rate reported in the second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their contraction subtracted 0.25 percentage points from the 4th quarter's growth rate....meanwhile, the previously reported 0.6% decrease in our real imports was revised to a 0.7% decrease, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their decrease meant that 0.11 percentage points was added to 4th quarter GDP....thus, our weakening trade balance subtracted a net 0.14% percentage points from 4th quarter GDP, rather than the 0.25% percentage points subtraction from GDP by our trade deficit that was indicated in the second estimate...

finally, there were also small revisions to real government consumption and investment in this 3rd estimate, that turned the total government contribution positive, as it was in the 1st estimate...real federal government consumption and investment was seen to have grown at a 2.3% rate from the 3rd quarter in this estimate, revised from the 2.2% growth rate of the federal government reported in the 2nd estimate....real federal spending for defense was revised to show it growing at a 2.8% rate, rather than the 2.7% rate last reported, adding 0.11 percentage points to 4th quarter GDP, while all other federal consumption and investment grew at a 1.5% rate, which was unrevised from the 2nd estimate, and thus added 0.04 percentage points to GDP.....note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services....mostly offsetting the federal growth, real state and local consumption and investment was revised from shrinking at a 1.4% rate in the second estimate to a contraction at a 1.2% rate in this estimate, as state and local investment spending fell at a 7.8% rate and subtracted 0.16 percentage points from 4th quarter GDP, while state and local consumption spending grew at a 0.3% rate and added 0.03 percentage points to GDP...

our FRED bar graph below, which can also be viewed as an interactive at the FRED site, has been updated with these latest GDP revisions...each color coded bar shows the real inflation adjusted change, expressed in billions of chained 2009 dollars, in one of the major components of GDP over each quarter since the beginning of 2012...in each quarterly grouping of seven bars on this graph, the quarterly changes in real personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in real private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and investment is shown in pink, and the real change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they did in the recent quarter, they'll appear below the zero line...it’s fairly clear from this graph that our personal consumption expenditures has underpinned GDP growth over this period, and especially in the quarter just ended…

February Durable Goods New Orders Down 2.8%, Shipments Down 0.9%, Inventories Down 0.3%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for February (pdf) from the Census Bureau reported that the widely watched new orders for manufactured durable goods fell by $6.6 billion or 2.8% to $229.4 billion in February, following a revised increase of $9.5 billion, or 4.2%, in Janaury new orders, which had been originally reported as a 4.9% increase from December...however, year to date orders are now 2.6% higher than they were a year ago, despite the fact that new orders have decreased 5 out of the last 7 months...as is usually the case, the volatile monthly change in new orders for transportation equipment drove the February headline change, as those transportation equipment orders fell $4.9 billion or 6.2% to $74.2 billion, on a 27.1% decrease to $10,147 million in orders for commercial aircraft coupled with a 29.2% decrease to $3,743 million in new orders for defense aircraft....excluding those new orders for transportation equipment, other new orders still fell by 1.0% in February, as the important new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, fell 1.8% to $67,350 million, after the January change in orders for such capital goods was revised from a 3.9% increase to a 3.1% increase....

meanwhile, the seasonally adjusted value of January shipments of durable goods, which which will be inputs into various components of 1st quarter GDP after adjusting for changes in prices, fell by $2.1 billion or 0.9 percent to $238.3 billion, after January's shipments were revised from a increase of 1.9% to a increase of 1.3%, while the change in December's shipments were revised from a 1.6% decrease to a decrease of 1.8%...again, lower shipments of transportation equipment drove the February change, as they fell $1.0 billion or 1.2 percent to $79.0 billion, as the value of shipments of commercial aircraft fell 8.0% to $12,983 million; excluding that volatile sector, the value of other shipments of durable goods still fell 0.7%, but is nonetheless 1.5% higher year to date than a year ago....meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, fell for the 7th time in 8 months, decreasing by $1.1 billion or 0.3 percent to $394.3 billion, following a 0.2% decrease in January that was originally reported as a 0.1% decrease...inventories excluding transportation equipment were also down 0.3% in February, as the decline in durable inventories was led by a $0.4 billion or 1.2 percent decrease to $33.2 billion in inventories of primary metals...

finally, unfilled orders for manufactured durable goods, which we consider a better measure of industry conditions than the widely watched but volatile new orders, fell for the second time in three months, decreasing by $4.2 billion or 0.4 percent to $1,183.7 billion, after the 0.1% decrease reported for January was revised to virtually unchanged...a 0.6% decrease to $789,105 million in unfilled orders for transportation equipment was responsible for the drop, as unfilled orders excluding transportation equipment rose 0.2% to $394,562 million....compared to a year ago, the unfilled order book for durable goods is still 1.6% below last February's level, with unfilled orders for transportation equipment 1.7% below their year ago level, on a 5.6% decrease in the backlog of orders for motor vehicles.....

New Homes Continue to Sell at a Half Million a Year Rate in February

the Census report on New Residential Sales for February (pdf) estimated that new single family homes were selling at a seasonally adjusted rate of 512,000 new homes a year in February, which was 2.0 percent (±18.8%)* above the revised January rate of 502,000 new single family homes a year, but still 6.1 percent (±17.9%)* below the estimated annual rate that new homes were selling at in February of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether February new home sales rose or fell from those of January or even from those of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and subject to the largest revisions of any census construction series....hence, these initial reports are not very reliable and often see significant revisions...with this report; sales of new single family homes in January were revised from the annual rate of 494,000 reported last month to a 502,000 a year rate, while the annual rate of December's sales were revised from the revised 544,000 annually reported last month to an annual rate of 540,000...

the annual rates of sales reported here are extrapolated from the estimates of Census field reps, which showed that approximately 44,000 new single family homes sold in February, up from the estimated 38,000 new homes that sold in January, which was revised from 37,000, while the unadjusted estimate for December home sales was unrevised at 38,000, and the estimate for November sales, first reported at 34,000, was revised up from last month's revised 35,000 estimate to 36,000.....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in February was $301,400, up from $283,900 in January, which was originally reported as $278,800, while the average new home sales price was $348,900, down from $363,400 in January, and down from the average sales price of $355,900 in February a year ago....a seasonally adjusted estimate of 240,000 new single family houses remained for sale at the end of February, which represents a 5.6 month supply at the February sales rate, down from a 5.8 month supply in January...for more details and 6 FRED graphs on this report, see New Home Sales Down -6.1% From a Year Ago from Robert Oak at the Economic Populist...

Existing Home Sales Fall 7.1% in February, Prices Fall 1.4%

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales fell 7.1% in February, projecting that 5.08 million homes would sell over an entire year if February's home sales pace was extrapolated over that year, which was 2.2% greater than the annual sales rate projected in February of a year ago...that came after an annual sales rate of 5.47 homes in January, unrevised, and after January had scored the largest year-over-year home sales gain since July of 2013...the NAR also reported that the median sales price for all existing-home types in February was $210,800, which was 4.4% higher than a year earlier, which they promote as "the 48th consecutive monthly year over year increase in home prices" even though home prices are down 5.6% over the past two months and at the lowest average since March of last year...the NAR press release, which is titled Existing-Home Sales Fizzle in February, is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this indicates that roughly 314,000 homes sold in February, actually up 4.0% from the 302,000 homes that sold in January and up 6.4% from the 295,000 homes that sold in February of last year, so we can see there was a large seasonal adjustment applied to arrive at the lower headline numbers...home sales increased in every region of the country except the West, where they were down 1,000 to 69,000, while the South saw a 7.8% increase to 138,000 homes sold....that same pdf indicates that the median home selling price for all housing types fell 1.4% from a revised $213,700 in January to $210,800 in February, while the average home sales price was $253,900, also down 1.4% from the $257,700 average in January, but up 2.5% from the $247,800 average home sales price of February a year ago, with the regional average home sales prices ranging from a low of $196,900 in the Midwest to a high of $346,300 in the West...for additional coverage with long term graphs on this report, see Existing Home Sales Plunge -7.1% from Robert Oak at the Economic Populist..

note on the graphs used here

in March a year ago the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs before then...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all created and stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....